2012-2014 Developments Flashcards
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP: Delaware Court of Chancery Rules that…
Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP: Attorney-Client Privilege Passes as a Matter of Law to the Surviving Corporation in a Merger
Classic Ticking Fees are?
A classic ticking fee is an increase in the per-share cash consideration payable to seller stockholders as the time period between signing and closing passes certain milestones… The increase can start at signing, at a later specified date or upon the occurrence (or non-occurrence) of a specified event
Example of Increasing Reverse Termination Fees are? (Similar to ticking fee.)
E.g., if the buyer exercised an option to extend the outside date in order to continue pursuing antitrust clearance, the reverse termination fee (rather than the merger consideration as in a classic ticking fee)
Example of Ticking Dividends?
Sellers where target has regular dividends negotiate to pay dividends consistent with past practice, but won’t decrease PP at closing. E.g., Heinz.
Purpose of ticking fees, increasing RTFs and ticking dividends?
Make buyers close quickly in sign-and-close deals.
How did DGCL change in 2013 w/r/t Section 251(h); Back-end Mergers?
251(h) permits parties entering into a merger agreement to “opt in” to eliminate a target stockholder vote on a back-end merger following a tender or exchange offer in which the acquiror accumulates sufficient shares to approve the merger agreement (a majority unless the target has adopted a higher vote requirement) but less than the 90% necessary to effect a short-form merger.
Benefit of DGCL change in 2013 w/r/t Section 251(h); Back-end Mergers?
1.Elimination of “top-up” option and dual-track structures; subsequent offering periods unlikely to be useful (prev. necessary to hit top-up # or 90%).
2, Facilitates the financing of two-step private equity-sponsored acquisitions because the tender offer and the merger can be closed on the same day.
How did Delaware change in 2013 Section 18-1104 of the LLC Act; Default Fiduciary Duties?
In the absence of a contrary provision in any LLC agreement, fiduciary duties are owed by managers and controllers and other persons who at law or equity would owe such fiduciary duties.
Which transaction do not benefit from DGCL change in Section 251(h); Back-end Mergers?
if the transaction requires a significant amount of time between signing and closing to obtain third-party approvals (e.g., for regulated industries or antitrust issues), an acquiror likely will prefer to engage in a one-step merger transaction b/c after the shareholder vote is obtained, target can’t terminate transaction for superior proposals.
Del v. NY: Statute of Limitations
DE: 3 years
NY: 6 years
Del v. NY: Sandbagging
DE:Absent an express provision, pre-closing knowledge of a breach generally is not a bar to seeking recovery under Delaware law.
NY: New York law is less clear than DE, particularly if the knowledge arose from disclosure by the seller.
Del v. NY: Best efforts
DE: In leading Del. case (Hexion), the court found that a “reasonable best efforts” standard (presumably intended as something less than “best efforts”) required the promising party to take meaningful commercially reasonable and advisable steps to enhance the likelihood of a successful outcome.
NY: While some cases applying New York law have interpreted “best efforts” as requiring “reasonable” methods or a “high standard of care”, other cases have gone as far as holding such a covenant to be unenforceable absent explicit objective standards against which the performance is judged.
Del v. NY:Shareholder Damages in Public Merger if Buyer Walks Away (i.e., can shareholders sue for lost premium?)
DE: Comments from Del. suggest possible recovery, but not clear.
NY: In 2005 ConEd case, 2nd Cir said SH premium damages not recoverable b/c SHs not party to agreement.
Del v. NY: 1. Specific Performance; 2. Irreparable harm
DE: 1. Delaware law requires a showing at the standard of clear and convincing evidence. 2. DE respects K saying irrep. harm caused.
NY: 1. New York law generally requires only showing entitlement to spec. perf. remedy by a preponderance of the evidence (less than Del). 2. NY may req. more than just K language re irrep. harm.
Del v. NY: Obligation to good faith negotiation of matter post-signing
DE: Under DE law, such an explicit obligation is likely to be held enforceable even if material terms
remain to be negotiated.
NY: If material open terms remain at time of commitment to good faith, duty to negotiate is largely unenforceable.
